Think Government Job Losses Don't Hurt Us? Think Again
Conservative media figures have mocked President Obama's concerns about continuing job losses in the public sector but experts say the job cuts are more severe than in other recoveries in recent decades and threaten the recovering economy.
Conservative Media Mock Concerns About Public-Sector Job Loss
Bill Kristol: Obama Thinks "The Problem With The Economy Is That The Government Isn't Big Enough." Fox News contributor and Weekly Standard editor Bill Kristol said on the June 10 edition of Fox Broadcasting's Fox News Sunday:
KRISTOL: This gaffe is revealing about President Obama. And it's his policy. He wants more public sector jobs. That's his address to the country, his radio address this past weekend was about how we - as you pointed out in your discussion with Mitch Daniels - is about how we need -- Congress needs to spend more money on public sector jobs, that will get the economy going again. So there's a fundamental difference here. The Republicans believe that the private sector is the engine of economic growth. And President Obama believes that the private sector is doing fine and that the problem with the economy is that the government isn't big enough. [Fox Broadcasting, Fox News Sunday, 6/10/12]
Liz Cheney Refers To Public-Sector Job Losses As "The Good That Is Being Done At The State Level." Later on Fox News Sunday, host Chris Wallace asked Fox News contributor Liz Cheney if reducing public-sector job loss is "an answer for the economy." Cheney responded that President Obama's call for public-sector hiring is "trying to undo the good that is being done at the state level":
CHENEY: One prominent economist said this week, Chris, that if more government spending were the answer then Greece would now be experiencing a new golden age. So obviously more government spending is not the answer. I think Bill [Kristol] is right. I actually don't think this was a gaffe. This is what President Obama believes.
And I think -- it's interesting if you look what happened, which is that you got responsible governors like Mitch Daniels, Chris Christie, even to some extent Governor Cuomo, a Democrat in New York, who are tightening their own budgets who are going through a process of fiscal responsibility, who are reducing their state deficits, who are reducing unemployment. But as a result they have had to in fact cut the government roles. And the president's prescription now is to use federal tax dollars to come in and essentially undo that. You know, the president ought to be in situation where he's saying "what's working at state level let's put that in play here. Let's make this a better place for the private sector to invest. Let's cut taxes and let's reduce government." Instead he is actually trying to undo even the good that is being done at the state level. [Fox Broadcasting, Fox News Sunday, 6/10/12]
But Public-Sector Job Losses Have Been Severe And Unusual
Public Sector Has Lost Over 550,000 Jobs Since Mid-2009. Business Insider posted achart compiled from Federal Reserve Economic Data (FRED) showing that while private-sector jobs (blue) have been increasing since the beginning of 2010, public-sector jobs (red) -- most of which are at the local level but this also includes federal and state jobs -- continue to fall. The spike in the red line reflects the temporary hiring of Census workers in 2010.
[Business Insider, 6/8/12 ]
Wash. Post: State And Local Governments Continuing To Lose Jobs. The Washington Post created the following charts with data from the Bureau of Labor Statistics which show how monthly private-sector job gains compare to monthly job losses in state and local government:
[The Washington Post, 4/29/12 ]
Calculated Risk: Public-Sector Job Loss Is A "Significant Drag On Overall Employment." Financial blog Calculated Risk highlighted how public-sector jobs during Obama's presidency (blue) compare to Bush's first term (red). Calculated Risk called these job losses "a significant drag on overall employment":
[Calculated Risk, 3/18/12 ]
EPI: Loss Of Government Jobs In Current Recovery Contrasts Sharply With Other Recent Recoveries. The Economic Policy Institute stated that if public-sector employment had increased the way it did in previous recoveries, "there would be 1.2 million more public-sector jobs in the U.S. economy today" and "these extra public-sector jobs would have helped preserve about 500,000 private-sector jobs":
The figure below compares trends in public-sector employment in the last four recoveries. The current recovery is the only one that has seen public-sector losses over its first 31 months.
If public-sector employment had grown since June 2009 by the average amount it grew in the three previous recoveries (2.8 percent) instead of shrinking by 2.5 percent, there would be 1.2 million more public-sector jobs in the U.S. economy today. In addition, these extra public-sector jobs would have helped preserve about 500,000 private-sector jobs.
There is reason to be optimistic, though, as public-sector losses have moderated recently. If the sector begins to actually add jobs in the coming months, the economy would benefit significantly in 2012 and beyond.
[Economic Policy Institute, 4/5/12 ]
The Economist: "Government Payrolls Typically Swell In Economic Recoveries" But"Not This Time." A May 12 article in The Economist noted that, although public-sector jobs usually increase following economic downturns, "for much of the past two years the biggest source of job losses has been the public sector." From The Economist:
On May 8th Mr Obama sent Congress a "to-do list", asking it for tax incentives and mortgage refinancing in the hope of boosting private job creation. Yet for much of the past two years the biggest source of job losses has been the public sector.
Government payrolls typically swell in economic recoveries, by 5.9% on average during the first 34 months after a recession has ended, according to data from the Bureau of Labour Statistics. Not this time, however: from June of 2009 government employment dropped by 2.7% (see chart). The 2.5m overall rise in employment since the downturn's end corresponds to 3.1m new private jobs, less 600,000 lost government ones. [The Economist, 5/12/12 ]
Krugman: During Reagan-Era Recovery, "Government Employment Had Risen By 3.1 Percent; This Time Around, It's Down By 2.7 Percent." From economist Paul Krugman's March 4 New York Times column:
By this stage in the Reagan recovery, government employment had risen by 3.1 percent; this time around, it's down by 2.7 percent.
If government employment under Mr. Obama had grown at Reagan-era rates, 1.3 million more Americans would be working as schoolteachers, firefighters, police officers, etc., than are currently employed in such jobs.
And once you take the effects of public spending on private employment into account, a rough estimate is that the unemployment rate would be 1.5 percentage points lower than it is, or below 7 percent -- significantly better than the Reagan economy at this stage.
One implication of this comparison is that conservatives who love to compare Reagan's record with Mr. Obama's should think twice. Aside from the fact that recoveries from financial crises are almost always slower than ordinary recoveries, in reality Reagan was much more Keynesian than Mr. Obama, faced with an obstructionist G.O.P., has ever managed to be. [New York Times, 3/4/12 ]
Experts Note Public-Sector Job Losses Damage The Overall Economy
Wall Street Journal: Unemployment Rate Would Be Near 7.1% Without Government Job Cuts. Wall Street Journal reporter Justin Lahart stated that, all things equal, "if there were as many people working in government as there were in December 2008, the unemployment rate in April would have been 7.1%, not 8.1%." The post included the following chart:
[WSJ.com, 5/8/12 ]
Economist Mark Zandi: "Job Losses At State And Local Governments Is The Most Serious Weight On The Job Market." From an April 29 Washington Post article:
The state and local job losses are significant for several reasons, economists say. For one, these losses have a broad social impact. Laying off teachers means larger class sizes and fewer after-school programs, for example.
What's more, federal aid can go directly to state and local governments to prevent job losses, a relatively effective way to sustain economic growth. (Tax cuts, by contrast, can lead indirectly to job growth if they increase the amount of money consumers spend.)
"The job losses at state and local governments is the most serious weight on the job market," said Mark Zandi, chief economist at Moody's Analytics, who has advised both parties.
Experts worry that the cuts will have lasting effects.
"There's a big body of research showing that a lot of the things that state and local governments spend their money on have long-term effects on the economy and society as a whole," said Nicholas Johnson, vice president for state fiscal policy at CBPP. "Cutting school funding now can hurt the education of a future workforce." [The Washington Post, 4/29/12 ]
Economist Scott Brown: Economy Would Be Growing A Full Percentage Point Faster Without Drag From Government Job Losses. From a June 6 ABC News report:
"The government is actually contributing to the slow recovery," said Scott Brown, the chief economist at the Florida-based financial firm Raymond James & Associates.
Brown said that if it were not for the "drag" of this public sector job loss, the economy would likely be growing a full percentage point faster, with GDP growing at 3 percent rather than at 2 percent.
"That would help mop up the jobs lost during the downturn," he said. "Factor in the drag from government and we are growing at a pace that's roughly enough to absorb the growth in population but not fast enough to make up much of the ground lost." [ABC News, 6/6/12 ]
Economist Joel Naroff: When The Public Sector Cuts Jobs, "The Private Sector Gets Affected." A September 2, 2011, U.S. News & World Report article quoted economist Joel Naroff who pointed out that "the private sector gets affected" by public-sector job losses. From U.S. News & World Report:
Those job losses are taking their toll on the national economic scene, and are in their own way creating more job losses in the private sector. "If we're losing [20,000 to 25,000] in the public sector, that's income and spending that doesn't occur. It's more like [35,000 to 40,000] jobs as a result of that," says Joel Naroff, president of Naroff Economic Advisors, an economic consulting firm based in Holland, Pennsylvania. "So one job isn't just one job; it's more than one job. And so the private sector gets affected," he says.
Behind those government job losses are budget cuts , particularly from states and local governments, many of which have lost revenues as lower incomes and lower property values lead to lower tax income. Those budget cuts mean fewer government contracts, which also leads to pain in the private sector. The winding down of the stimulus package also contributed to these losses, as federal assistance to state governments for things like extra Medicaid funding has disappeared, leaving many states with substantial budget gaps.
Altogether, the strain on the national economy is considerable. "There's no such thing as a free budget cut." says Naroff. "If the public sector trims [20,000 to 25,000] jobs a month, then the private sector has to create those jobs before the economy can add one job. That's the hole that the public sector puts the economy in at this particular point," he says. [U.S. News & World Report, 9/2/11 ]
CBPP: Government Job Losses Hurt Those Who Don't Work In Government. From a February 8 report by the Center on Budget and Policy Priorities:
Here's how the economic damage from spending cuts happens: when lawmakers cut services they end contracts with private sector businesses and reduce spending on private sector goods, leading to layoffs or lower wages among private sector workers. When lawmakers cut services they also lay off teachers, firefighters, police officers, and other public sector workers (over 650,000 state and local government workers have lost their jobs since the recession hit the states). In turn, private AND public sector workers who are laid off, or who see their pay reduced, buy less and further reduce economic activity.
Deep cuts to state services also erode the foundations of a strong economy, in both the short and long term. Spending on education, transportation, and public safety has been shown to stimulate economic growth in the short run and is among the most important determinants of economic growth and job quality in the long run. Research also shows that expanding and improving upon these investments through well-targeted tax increases (in other words, finding new money to pay for better services) stimulates income and job growth. [Center on Budget and Policy Priorities, 2/8/12 ]
Brookings Institution: Government Job Growth Is Associated With Economic Recovery In Many Metro Areas. In June 2011, Howard Wial of the Brookings Institution observed that "government job growth is associated with the economic recovery of America's metropolitan areas" since 14 out of the 20 large metro areas with the strongest recoveries from the recession "gained government jobs since total employment began to recover in each metro area." By contrast 12 of the 15 major metro areas with the slowest recoveries "lost government jobs since total employment began to recover." Wial also noted that increased government employment boosts private-sector jobs and income:
I haven't been able to find anything else besides the growth of employment that's as closely associated with the strength of metropolitan economic recovery. Increased government employment means increased government spending, which means increased demand for goods and services and the creation of more private sector jobs and more private sector income. [The Brookings Institution, 6/22/11 ]
Wash Post.'s Klein: Public-Sector Job Losses Are A Problem That The Federal Government Could Actually Fix. In a June 8 post on The Washington Post's Wonkblog, Ezra Klein wrote:
Speaking of private-sector jobs, at this point the Obama presidency is net positive on private-sector jobs. Since February of 2009 -- remember, Obama wasn't president for most of January -- the economy has added, on net, 780,000 private-sector jobs. Hence the president's comments: The private sector's job creation machine is basically working, even if it would be nice to see it working faster. The public sector, conversely, has been losing jobs.
As a disclaimer, these numbers don't tell you very much. The bulk of the job losses came in early 2009, when Obama had just entered office and when his policies hadn't yet taken effect. Blaming him for what happened to the labor market in, say, March of 2009 is like blaming a firefighter for the damage the fire causes as his truck is pulling up. And even at this point in his presidency, the economy is driven by much more than his policy preferences. Europe, for instance.
That said, the place where you can most fairly blame the government for the shape of the labor market is in public-sector jobs. The federal government can choose to hire, fire or hold employment steady. It can give states money to keep emmployees on the job, or it can withhold that money. So the fact that the public sector is losing jobs isn't just a problem, but a problem that the federal government could, with 100 percent certainty, fix. [WashingtonPost.com, 6/8/12 ]
NY Times' Norris: Proposals To Prevent Public Sector Job Losses "Were Blocked By Republicans In Congress." From a January 6 New York Times post by chief financial correspondent Floyd Norris:
The declines in government jobs in both the Reagan and Obama presidencies coincided with major recessions, of course, which reduced tax receipts for all levels of government. If Mr. Obama had had his way, state and local government job losses in 2011 could have been reduced with more federal assistance, but such proposals were blocked by Republicans in Congress.
There is no reason to think Mr. Obama is as happy about the reduction in government workers as some Republicans. But like it or not, the Obama administration has turned out to be anything but a big-government one. [NYTimes.com, 1/6/12 ]